Thursday, September 27, 2012

"Cable" to enter Gaming markets

It's not a totally new idea - using cable systems to stream videogames.  Sega tried it with Time Warner and TCI in the 1990s with the Sega Channel - subscribers to the channel could download games into a blank cartridge to play on their game consoles.  However the cost of a monthly subscription and the reusable blank cartridge were high compared to the cost of games, which limited demand.  The addition of low cost videogame rentals at major video rental outlets effectively killed the experiment as players quickly embraced the low cost option.
   Time Warner looks to be testing the gaming market again, this time with partners AT&T and Verizon.   This time, however, instead of partnering with existing videogaming platforms, the plan is to develop a cloud-based gaming platform, with game play processing in the cloud and the display platform integrated within the cable box.  This could save the consumer the cost of purchasing stand-alone gaming platforms (and repurchasing them every 3-5 years for upgraded technology).  The new system would combine the networks high-speed data connections and cloud computing to shift most game action processing to the Cloud, removing the need for increasingly complex local processing units like Playstation, Wii, and Xbox.  Shifting processing to the cloud would also reduce the need for avid gamers to regularly upgrade to new consoles (and new versions of favorite games re-engineered for the new consoles).  The three home distribution networks hope to introduce their new gaming system next year, after upgrading data transmission, cloud-based game processing, and set-top box video processing technologies.
  The videogaming market is huge, generating an estimated $24.1 billion in sales last year.  And while hardcore gamers still focus on consoles for gaming play, a growing portion of casual gamers have been shifting their focus to gaming apps on smartphones and tablets.  This shift is reflected in a 39% drop in videogame hardware sales over the last year.  Further development of cloud-based gaming options could enable the most complex and intricate hard-core games to be played on TV screens - even on tablets and smartphones - without the need for consoles, cartridges, and discs.  That would likely significantly disrupt the current console-based business model - with hardware (consoles) being sold near cost, and profits generated from operating system royalties from sales of game discs and cartridges.
   Developing and implementing a cloud-based gaming system would seem to have benefits for consumers, content providers, and carriers.
With cloud gaming, consumers will be able to avoid buying Sony’s PlayStation 3, Microsoft’s Xbox 360 or Nintendo’s Wii, and play using generic controllers connected to their set-top box or TV. Some carriers are looking at software that turns smartphones into controllers, (representatives) said.
Working with a single online cloud-gaming operating system would have clear benefits for game producers, who could avoid excessive royalty payments to console developers, and save the costs of having to adapt games for multiple platforms.  As for cable operators and carriers,
“It makes perfect sense why they would want to go after this market,” said (Mitch) Lasky, who was previously an executive at Electronic Arts. “Streaming games use a ton of bandwidth and really benefit from good networks. But it’s a gnarly execution problem they’re trying to solve.”
  Cloud-based gaming systems are already being tested and deployed in a number of markets around the world.  Playcast, based in Israel, currently has deals with telecommunication networks in South Korea, Singapore, France and Portugal for a subscription cloud-based gaming service featuring Activision gaming titles.  Another firm, CiiNOW, is running multiple trials in Europe.  Its CEO, Ron Haberman, commented that
“If there was ever a service that fit network providers, it’s this one... 2013 is going to be when we see big commercial offerings.”
  Cable giants Comcast and Cox also indicated an interest in offering videogaming services, although declining to provide details.  Meanwhile, Sony's hedging its gaming future - purchasing cloud-gaming company Gaikai for $380 million in July.

  Cable and other multichannel operators are losing subscribers, so have been searching for new revenue sources.  Gaming is a big market; the introduction of reliable, high-quality, cloud-based gaming that would equal or surpass the gaming experience offered by dedicated consoles would likely profoundly reshape gaming markets by offering significant benefits and savings for players, game-creators, and network operators and access-points.  The only likely loser would be console manufacturers.  It's a good thing that those big conglomerates (Sony, Microsoft, Nintendo) are likely to be pitted against other big conglomerates (AT&T, Time Warner, Verizon) - with both sides having deep pockets, consumers are likely to benefit while the alternative gaming structures battle it out.

Sources -  Xbox Challenged as Cable Plots to Make Consoles Obsolete,  Bloomberg.
Sony buys cloud gaming company Gaikai for $380m,  the guardian

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